Something to bank on

Hans Merki, Hewlett-Packard, looks at how information lifecycle management can help banks reach their Basel II obligations as the deadline approaches.

For a bank, operational risk is a daily issue. Never more so than in 2005, when initiatives spearheaded by Basel II have brought the issue to the forefront of both the CEO and the CIO in European financial services organisations.

There must be very few working in the financial services sector who do not know what Basel II is – or its implications. The legislation has been evolving for some time, from the original Basel Accord for Capital Adequacy and now its successor the New Basel Capital Accord, or Basel II. The thrust of the rule adheres to similar recent compliance legislation, most notably Sarbanes-Oxley in the USA, or the work around International Accounting Standards. The common objective is to develop universal and transparent risk management, capital allocation, and financial record-keeping structures to prevent any further shocks to the international monetary systems after the Enron and Parmalat scandals.

Meeting Basel II

Getting across the Basel II ‘finishing line’ is not cheap. According to specialist research agency Celent, financial services spending worldwide on operational risk initiatives may reach $12bn this year as banks seek to make themselves compliant to at least the baseline Basel II standards before the deadline at the end of 2006.

It is also widely acknowledged that coping with these new compliance mechanisms involves a burden for the financial services companies affected. In January in a speech in London the chief executive of the UK Financial Services Authority (FSA), the UK’s financial regulatory body, warned that both UK businesses and the FSA itself face major challenges in maintaining high standards. ‘Financial firms will continue to have to contend with much international regulatory reform in the next few years,’ he said.

The onus is thus on banks to demonstrate best practice around operational risk management, ranging from superlative email management and archiving to world-class document retention and routing. At the same time many organisations perceive Basel II as beneficial to the extent that it offers an opportunity to rationalise processes, improve efficiency, and reduce the amount of capital needed under regulatory requirements.

Hans Merki is worldwide business development manager in HP’s front office solutions team. ‘When I talk to banking customers here in Europe, issues around data management and data security are seen as critical. Companies are very aware of the need to capture information best, both to serve customers and also to meet Basel II,’ he says.

A solution – ILM

The IT industry has been struggling for years to turn data into information. Computers use bits and bytes; businesses want information and knowledge. For too long the difference between the two has often looked more like a chasm than a spectrum.

Now a solution is taking shape in the form of Information Lifecycle Management (ILM). Led by IT powerhouses such as Hewlett-Packard (HP), the idea is to provide organisations a framework for the effective routing, management, retention, storage, archiving and deletion of corporate information.

HP StorageWorks ILM solution in this area helps organisations manage change by recognising that information changes throughout its life cycle. The bottom line is that people need access to data. HP StorageWorks ILM processes offer a broad range of products robust enough to cut through complexity for improved management and effective information access. Superior business agility is the objective, with ILM processes enhancing, extending and linking business processes and applications across the customer’s entire storage infrastructure.

Within the overarching HP ILM portfolio it is important to note that a product that can help your needs around Basel II-style compliance already exists: the HP Reference Information Storage System (RISS), a solution that has been designed from the ground up recognising the need for automated information management to mitigate risk, manage regulatory compliance, and reduce costs.

How? The concept sees retention management as a way to focus on minimising risk. Corporate governance and government regulation require retention policies as companies may be compelled in an audit or legal proceeding to produce email communications or other electronic records.

If you don’t think email is an issue, you either don’t work in a modern business environment or you are kidding yourself. Research into corporate email use estimates that the average corporate user sends or receives 76 emails a day. For a 50,000-employee enterprise, that means 19 million messages per week, or nearly a billion per year. Add attachments and other office productivity files to these numbers, and businesses face a complex challenge to find the right balance between accessing information and the cost of keeping it. Moreover, with as much as 70 per cent of corporate intellectual property stored within, or accessible via emails enterprise messaging is truly mission-critical.

HP RISS therefore provides a fully integrated and highly scalable active achiving solution for storing reference information that can help meet email management regulatory stipulations and balance information accessibllity and cost of storage and retrieval. RISS reduces costs, mitigates risk and provides unprecedented accessibility for long-term storage.

The way forward for European bankers

HP has impressive credentials as an IT supplier to the financial services industry. The company powers over 100 global stock or commodity exchanges, helps support 95 per centof the world’s securities transactions, handles two out of every three credit card transactions worldwide as well as three of every four electronic funds transfers.

This is even more true if the bank starts putting email management in a business context. ‘Beyond Basel II there are also issues around anti-money laundering and economic crime that mean that confidentiality and security of your email network are paramount,’ adds HP’s Merki. ‘You need to be taking care of your operational risk in all transactions, from machine to machine and human to human too. That’s why an integrated solution should be looked at to deliver that secure, near real-time system response and robustness your high net worth clients demand.’

Further information
Hewlett-Packard
Tel: +41 78 844 0167
Email: hans.merki@hp.com
Website: www.hp.com/go/ilm

Why HP?

A good reason to partner with HP is that the company is the world’s biggest supplier of computer storage products. IT market watchers International Data Corporation (IDC) consistently place HP at the summit of league tables around worldwide total disk storage systems factory revenue, also giving it the equal largest individual share of the open storage area network (SAN) field (with 28 per cent), and a very strong position in the emerging network-attached storage (NAS) market.

The company’s commitment to storage is shown by its consistent increase in R&D funds to the area, allied with the fact that in its fourth quarter results last November showed revenues from this sector growing by 16 per cent compared to the previous three months.

And in December 2004 HP announced enhanced information management software together with new disk array, tape and optical storage technologies as part of a drive to offer customers enhanced information management solutions to better align data retention and protection costs with the business value of information. The company has said that it sees users storing data on the most cost-effective storage platform based on the changing business relevance of information throughout its life cycle, and plans to offer appropriate products as a result.

Given this depth of expertise about this market, its strength in breadth and depth in storage and ILM, the fact that specific solutions around compliance and European concerns around Basel II are now being rolled out to banks, why not talk to HP to see if it can help?